According to the news report by CNBC, The Walt Disney Co. released its earnings report on Tuesday and reported that EPS (earnings per share) and revenue both beat analyst expectations. This was due to increased sales in its theme park businesses and media networks. The company said that ESPN+, its sports streaming service, had seen subscriber numbers go up to 2 million.
This quarterly earnings report comes at a time when the company is increasing its direct-to-customer services while facing increasing competition from streaming service giant Netflix and other entrants to the space.
During the conference call held after the earnings were released, Chief Executive Officer Bob Iger stated that ESPN+ had doubled its subscriber base in the last 5 months. He also said that their direct-to-consumer unit remained their first priority.
Earnings per share (EPS) were at $1.84, versus the market’s expectation of $1.55. Disney’s revenues were at $15.30 billion, versus the market expectation of $15.14 billion.
However, revenue compared to its own performance a year ago was down. The fiscal firstquarter of 2017 saw revenues of $15.35 billion, so 2018’s fiscal firstquarter revenue was $0.05 billion less.
Adjusted EPS dropped by 3% from the $1.89 per share from a year ago.
Disney’s shares went up by $0.45 to trade at $113.11 in late trading. During the trading day, the entertainment giant’s shares were up by 2%.
Disney is making a big push into direct-to-consumer video streaming services due to changing consumer tastes. More and more customers are abandoning their Pay-Tv packages for cheaper options available through internet connections.
Disney, which can count cable networks such as sports channel ESPN and movie studios like Marvel in its assets, launched ESPN+ in 2018. Later this year, the company is planning to launch Disney+, which will be its movie and original programming streaming service.
The company’s international segment and direct-to-consumer business posted a $918 million revenue but also saw an operating loss to the tune of $136 million due to increased costs. These costs incurred were related to ESPN+ as well as its scheduled launch of Disney+.
Disney also said that it was expecting there to be a negative impact on the operating income for its international and direct-to-consumer segments in the second quarter due to continued investments in the two new streaming services.
The media networks division, including ESPN, saw a 7% increase in revenue in the first quarter to $5.92 billion vis-à-vis the last year. The company’s parks division gained 5% to close the quarter with a revenue of $6.82 billion.
Studio entertainment revenues dropped by 27% to $1.8 billion vis-à-vis last year. This was because the company had released blockbusters Thor: Ragnarok and Star Wars: The Last Jedi the in last year’s quarter. However, this year, the movies Mary Poppins Returns and The Nutcracker and the Four Realms did not do as well.
Disney is also expecting that the still pending purchase of Twenty-First Century Fox’s assets will help with its streaming strategy. Through this acquisition, Disney will have access to added media assets for Disney+ and will also give the entertainment giant a bigger stake in Hulu, another streaming service.
The challenge that Disney, like others, faces is that streaming services do not generate high profits. They also need heavier investments in creating content and developing technology, but are lower priced than cable TV to attract customers.
In fact, in a filing in January, Disney revealed that its ownership of BAMtech (the technology that powers its ESPN+ streaming service) and its stake in Hulu led to losses of greater than $1 billion for 2018.